ETMarkets Smart Talk: Nikhil Aggarwal Highlights Corporate Bonds as a Strong Alternative to Fixed Deposits
As fixed deposit (FD) rates begin to decline, a notable shift in investor behavior is emerging, with increased interest in corporate bonds and alternative fixed-income products. This trend has been evolving gradually; however, the current moderation in FD rates has made the transition more pronounced. Investors are now compelled to explore options beyond traditional savings instruments, particularly as the real returns on FDs—when adjusted for taxes and inflation—are diminishing. The increasing participation of retail investors, especially from tier-2 and tier-3 cities, reflects a pivotal moment in the Indian bond market, suggesting a broader financialization of fixed income akin to historical trends seen in equities.
Corporate bonds are gaining traction, especially in the AA to A rating segments, which are providing spreads that effectively compensate for inherent credit risks. Recent data highlights that retail investments in bonds surged to ₹4,389 crore in April 2026, representing a 2.5 times increase compared to the same month last year. Furthermore, corporate bond issuances in the calendar year 2025 reached an impressive $128 billion, nearly double that of 2020, indicating strong structural demand and supply dynamics. This momentum is supported by favorable regulatory reforms and enhanced market access, making the bond market increasingly appealing to a diverse range of investors, not solely high-net-worth individuals (HNIs).
Year-on-year growth in retail participation across online bond platforms has been remarkable, recording approximately 140% according to recent industry data. This burgeoning interest is underscored by significant infrastructure improvements in the bond market, such as the reduction of minimum ticket sizes and enhanced transparency norms, which facilitate easier access for retail investors. As the awareness and trust in bond investing increase, driven by educational initiatives and sophisticated digital platforms, it is expected that the retail slice of the $2.8 trillion bond market will expand substantially in the coming years.
While the pursuit of higher yields is tempting, investors must exercise caution and discern risk effectively. A critical understanding of yield premiums—where higher yields often correlate with higher risks—is essential. Rating assessments, issuer interest coverage ratios, and liquidity considerations are vital filters for evaluating potential investments. Investors should be wary of unknown issuers offering yields significantly above government securities or those who lack established credit ratings, as these might signal underlying risks. As the retail bond market evolves, platforms like Grip Invest are positioned to provide transparency and insight, guiding investors toward informed decision-making.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)